Market leading insight for tax experts
View online issue

Fine dining or fine distinction?

printer Mail

Fine distinctions are critical in VAT. How you arrange the deckchairs makes all the difference as to whether you are going to sink or float. There was a clear example of this in the recent tribunal decision in Stocks Fly Fishery [2016] UKFTT 218.

The appellant maintained a stocked fishing lake, and sold fishing passes to anglers. There was no dispute that this was fundamentally a standard rated supply. However, the appellant offered the choice either of catching fish and throwing them back alive into the lake, or catching a predetermined number of fish, and taking these away to eat. The pricing of the latter package was slightly higher than the former.

Turning to HMRC’s Notice 742, para 6.4.1, this says, in effect, that a charge made for the fishing is standard rated, but if the angler is then allowed to take away the edible fish, and this is separately charged for, that is a zero rated sale of food, so the separate charge has no VAT.

Returning to the case of the appellant, they believed they came within this interpretation owing to the fact that there was a distinct, and price difference, between the licence to catch and throw back, and the licence to catch and keep, the fish. Indeed, there were different prices depending on how many fish one intended to keep. It was obvious from the pricing differentials as to how much was attributed to each particular fish that was caught. But the tribunal supported HMRC in the view that there was a composite supply of standard rated sporting services, and no part of the value could be attributed to the food supply entailed in removing the fish.

It is tempting at this point to allege that the case was taken in contradiction of HMRC’s declared policy in Notice 742. But that would be incorrect. If you look carefully at Notice 742 it refers to fish being caught, and then sold, as a separate action from the catching. The difference between this and Stocks Fly Fishery was that the angler had to commit at the outset to the package which allowed him to remove fish, rather than deciding, once the fish had been hooked, that he wanted to have it for his dinner. The difference was that, say a person was unlucky enough not to make a catch during the day, he would nonetheless have paid the higher tariff on the basis that he could, had he caught one, have removed the fish. This, HMRC convinced the tribunal, was a material difference to where, having caught the fish, the angler is charged ‘per fish’ he removes. It was a single combined transaction of catching and keeping, but could not be split between those two elements for tax purposes.

Given that no sensible angler would commit to the higher price unless he was confident of making enough catches, this may appear to be a distinction without a difference. But distinctions are almost never without difference where VAT is concerned. It is difficult to criticise the decision, and it stands as a warning that the fine detail of arrangements affects the VAT outcome.

Issue: 1306
Categories: In brief , VAT